Corporation Tax: management expenses: insurance premiums
Premiums for the insurance of assets used in the management of an investment company’s business (or for periods starting on or after 1 April 2004 those of a ‘company with investment business’) are normally management expenses within ICTA88/S75. But premiums for the insurance of the investments themselves do not qualify for relief. The Courts have interpreted restrictively the phrase ‘expenses of management’. They have emphasised expenses of management are distinct from expenses of general administration of the business. There is guidance on this distinction at CTM08160. The cost of insurance against loss of particular investments is not even a general expense of conducting the investment company’s business.
Directors and employees
Premiums on policies on the lives of directors and employees are unlikely to qualify as management expenses, except where you can regard the premiums as part of their remuneration. A deduction will be due to an investment company employer for premiums for a scheme of permanent health insurance that provides only income benefits when:
- the insurance provides direct benefits to employees,
- the proceeds accrue in the first instance to the employer, as long as the benefits will be passed on to the employees.
However in all cases you must apply the general principle that the amount of benefits should be reasonable in the light of the duties performed and the services rendered by the employee (see CTM08170). A deduction for premiums in respect of employees will be admissible only to the extent that their wages qualify as management expenses.
Under Section 88, certain sums paid by a person to the Export Credits Guarantee Department under investment insurance schemes are treated as management expenses, whether or not the sums would be allowable on normal principles. There is guidance on the Export Credits Guarantee insurance scheme at BIM45580.